Multilevel Monte Carlo method for jump-diffusion SDEs

Multilevel Monte Carlo Methods for Applications in Finance *

“…Using Hölder's inequality, the bound max(R τ , R f τ ) ≤ 2 and standard results for a Poisson process, the first term can be bounded using weak convergence results for the constant rate process, and the second term can be bounded using the corresponding strong convergence results [46]. This guarantees that the multilevel procedure does converge to the correct value.…”

“…Such differences will give an O(1) difference in the payoff value, and hence the multilevel variance will be O(h). A more detailed analysis of this is given in [46].…”